AMD shares fall, market fears Intel price cuts

NEW YORK (Reuters) - Shares in Advanced Micro Devices Inc. (AMD.N: Quote, Profile, Research) fell more than 9 percent on Thursday as investors reacted to expected aggressive pricing by rival chip maker Intel Corp. (INTC.O: Quote, Profile, Research), according to analysts.

Analysts said the market was pulling out of AMD, believing that its strong 18-month run could be halted by expected plans by Intel to slash prices further to win back market share it has been losing to AMD.

"I think people are wondering how well AMD's future chips will stack up against the kit that Intel has announced," said JoAnne Feeney, an analyst at Punk, Ziegel and Co.

Susquehanna Financial Group analyst Kevin Vassily, who issued a neutral rating on AMD Thursday morning, said the company had acknowledged that Intel has chosen to pursue a route of aggressive pricing.

"While they're confident in the product position, they're realistic enough to realize that it may have an impact," Vassily said.

AMD has been making steady inroads against its much larger rival Intel, which has posted disappointing profit and revenue for the past few quarters.

Prior to Thursday's tumble, AMD shares had more than doubled over the past year, while Intel's had fallen 16 percent.

AMD said on Wednesday its second-quarter sales would be flat or slightly lower than the first quarter's $1.33 billion, though up about 65 percent from a year earlier. Analysts polled by Reuters Estimates had forecast second-quarter sales at $1.34 billion.

The brokerage arm of Credit Suisse cut its price target on AMD stock to $37 from $40, citing the lower-than-expected revenue estimate.

Credit Suisse said AMD's gross margin would be higher than expected, which will likely drive some analysts' earnings estimates slightly up.

However, the bank said the magnitude of the margin increase will likely be "disappointing" given the past quarters' market share gains, and increasing investor belief that Intel will start to rise over the coming few quarters.

AMD's shares fell $3.36, or 9.4 percent, to $32.05. Intel shares gained 40 cents, or 2 percent, to $19.52 in afternoon Nasdaq trading.

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thanks for the news post, AMD's shares certainly did take a beating today. They've been up a lot though so they are kind of expensive and room to fall. An Intel price war would certainly hurt them, but the court case between Intel and AMD is going on right now and the outcome of that could also either help or hurt AMD.